Existence of equilibria for economies with externalities and a measure space of consumers

Abstract

This paper considers an exchange economy with a measure space of agents and consumption externalities, which take into account two possible external effects on consumers’ preferences: dependence upon prices and dependence upon other agents’ consumption. We first consider a model with a general externality mapping and we then treat the particular case of reference coalition externalities, in which the preferences of each agent a are influenced by prices and by the global or the mean consumption of the agents in finitely many (exogenously given) reference coalitions associated with agent a. Our paper provides existence results of equilibria in both models when consumers have transitive preferences. It extends in exchange economies the standard results by Aumann [2], Schmeidler [16], Hildenbrand [12], and previous results by Greenberg et al. [11] for price dependent preferences, Schmeidler [17] for fixed reference coalitions and Noguchi [15] for a more particular concept of reference coalitions. We also mention related results obtained independently by Balder [4]. Copyright Springer-Verlag Berlin/Heidelberg 2005